On employer-paid parking and parking (cash-out) policy: A formal synthesis of different perspectives

Employer-paid parking suffers from many weaknesses but is still widespread. This paper seeks to elaborate the line of reasoning accounting for the role of workplace parking and parking policy in the wage negotiation process, the income tax code, regulatory parking standards, and taking into account the adverse effects of parking at the workplace, parking elsewhere or not parking at all. We provide an assessment from two perspectives: firms provide parking spaces, a fringe benefit, if it is profitable to do so (market outcome); a social planner or policymaker endorses workplace parking if it is welfare-enhancing (social optimum). We find that policymakers as well as employers may lack sufficient incentive to reduce parking at the workplace, even in the presence of an employer parking policy program that pursues the goal of making parking opportunity cost visible to employees (parking cash-out). To foster a reduction of employer-paid parking and to exploit the potential welfare gains associated with employee-paid parking, we propose customized local cash-out programs at the firm level rather than uniform fringe benefit taxation enacted by the federal government, provided that cash-out levels account for local particularities (e.g. prevailing traffic conditions, co-existing transport policies), that bargaining power of workers over employers in terms of the incidence of cash-out is limited, and that cash-out as a wage supplement is not subject to income taxation. The (second-best) socially optimal cash-out level need not be identical to the opportunity resource cost of the employer-provided parking space.